The audit the state used to justify suspending Medicaid payments to an Alamogordo health center last year appears to have included mistakenly flagged claims, according to the state Attorney General’s Office.

That raises questions about the process the Human Services Department (HSD) used to ensure the audit was accurate before deciding to suspend Medicaid dollars to the Alamogordo organization.

Without that funding, The Counseling Center closed its doors last fall. While the AG’s office has completed its investigation into the organization’s spending of Medicaid money without filing charges, other investigations – sparked in part by the audit that led to the payment freeze – are ongoing.

Using a statistical formula, the contractor that performed the audit, Public Consulting Group Inc. (PCG) of Massachusetts, estimated there had been $612,000 in potential Medicaid overpayments to The Counseling Center over several years based on $1,873 in questionable costs.

But the AG’s office, during its investigation, flagged only $375 in questionable costs, said Jody Curran, the head of Attorney General Gary King’s Medicaid Fraud Control Unit.

If PCG had been working from $375 instead of $1,873, its estimate of Medicaid overbilling likely would have been less than the $612,000 the audit claimed.

What explains the difference? The AG’s report on The Counseling Center indicates that its investigators were able to resolve some of the issues the PCG audit flagged by reviewing records and interviewing staff. By contrast, PCG and HSD never gave James Kerlin, executive director of The Counseling Center, an opportunity to respond to the audit’s findings before the report was finalized and made public, Kerlin says.

In many cases, auditors present findings to staff of audited organizations to give them an opportunity to refute findings or address misunderstandings. For example, most state and local governmental agencies are audited annually in New Mexico. Staff within those agencies are afforded the chance to see and respond to audit findings within a certain amount of time before audits are made public.

HSD used the over-billing claim made in the PCG audit, in part, to find "credible allegations of fraud" against The Counseling Center in June 2013 – a finding that led to the payment freeze that put the organization out of business and sparked criminal investigations by the AG and other state and federal agencies.

The Alamogordo center is one of 15 organizations HSD accused of “credible allegations of fraud” last June. Attorney General Gary King, a Democrat who is running for governor against Republican incumbent Susana Martinez, announced last month that his office had found "insufficient evidence to support allegations of fraud" against the Counseling Center of Alamogordo.

Portions of the audit that detail specific findings against the other 14 providers remain secret, and the attorney general's investigations into those organizations are ongoing. As it did in the case of The Counseling Center, HSD froze funding to those organizations last year. Many went out of business, replaced by organizations from Arizona.

The discrepancies

During their investigation, the Attorney General’s staff reviewed records and interviewed PCG staff and employees of HSD about billing practices and how individuals are credentialed to provide services to clients. According to the AG’s investigative report, PCG flagged several billing claims because, it claimed, it appeared that “unqualified staff” had performed services.

But the AG found that wasn’t the case. “Most” of those issues “were resolved by reviewing the credentialing files and speaking with the PCG staff,” the investigation synopsis reads. It states that PCG flagged a number of claims because it thought one therapist wasn’t credentialed to provide rehabilitation services. But the AG’s office “carefully reviewed” that employee’s credentialing file and found that he did have the necessary qualifications, it states.

AG investigators also noted that they had located “paperwork for most of the missing documentation so that there did not appear to be a pattern of billing without supporting documentation,” according to the synopsis.

That wasn’t the only discrepancy between what PCG auditors and AG investigators each found.

Reviewing another set of claims submitted by the Alamogordo counseling center, state investigators flagged about $4,880 in questionable billing compared to the $43,137 highlighted in the PCG audit, Curran said. Both reviewed the same 10 cases involving 1,529 claims worth $193,871 in government money.

Not sharing audit findings

Kerlin wasn’t the only one denied an opportunity to see PCG’s findings and respond. PCG and HSD did not share the audit’s findings with any of the 15 organizations whose Medicaid payments HSD froze. It is unclear if HSD did a systematic check itself to make sure claims flagged weren’t mistakenly identified as inappropriate.

An HSD spokesman said his state agency reviewed some of The Counseling Center’s claims before finalizing the audit.

“The final number in the audit excludes things like billing errors and, you know, simple mistakes and stuff like that,” HSD spokesman Matt Kennicott said.

PCG declined to comment for this story.

Kerlin said he can’t assess the AG’s findings or those of the audit because “I never was and still don’t know what it was that we supposedly we did wrong.”

As part of its probe, the Attorney General’s investigators did find $13,000 in questionable claims submitted by the Alamogordo counseling center unrelated to last year’s audit.

But those claims were identified after following up on allegations made by an anonymous source, Curran said.

The Alamogordo center might still be under scrutiny. While the AG found “insufficient evidence to support allegations of fraud,” other law enforcement agencies – such as the state Taxation and Revenue Department, the FBI and the U.S. Attorney's Office – are continuing to investigate allegations, Kennicott said.

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A state-hired auditor found $1,873 in questionable Medicaid payments to a health-care provider cleared of fraud last week by the state's top cop, according to a portion of the audit released Wednesday.

Using a statistical formula, the auditor then extrapolated from that $1,873 figure to come up with approximately $612,000 in potential Medicaid overpayments by The Counseling Center in Alamogordo, the document shows.

There are still a lot of questions about the New Mexico Human Services Department's abrupt halt of Medicaid funding to 15 behavioral health providers and the state's contracts with Arizona firms to take over provider management.